Apple

Interesting Business Week article on the just ended decade. Like everyone else they think it was awful. But point out that in terms of the economy maybe the brightest light was Apple. Hard to argue with that assessment.

From what many believe was permanent decline at the start of the decade to iTunes, iPod, iPhone and reinvigoration of the iMac, Apple has had a terrific decade. The iPod changed an industry – music – forever. A quarter of a billion iPods sold and eight billion songs sold on iTunes. The flip side, music sales – mainly CDs – from $39 billion in 1999 to less than $18 billion in 2009. More than 100,000 software applications so far developed for the iPhone, revolutionizing another industry – telecommunications.

Apple may well be the model for economic growth in America going forward. But it sure is a fundamentally different model than last century. From dominating an industry to constant reinvention into new industries, from stability to agility, from making things to inventing and selling things, from hundreds of thousands of employees to tens of thousands, from selling at home to customers world wide.

And, most fundamentally, employing human minds not their muscle. Many believe American economic growth going forward needs to be export based. An economy no longer based on American consumers buying on credit or financial engineering that so dominated the last expansion. But if we are to become an export power, Apple will be the model. It manufactures almost none of its products in the US. Rather it adds value by its skills as one of the best at both pre production (R&D, engineering, design) and post production (sales and marketing). Its the new face of “making things” for global consumers: one with little or no American factory workers.

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.

This Post Has 5 Comments

Isn’t the proposition that we add value through our brain power contingent on agreement from other nations that they don’t? What if China decided that its best route to success was to copy our lead and add value without making things? Clearly, someone would always have the upper hand in such a dual, but who would be left to make things? Are high wage manufacturing jobs impossible to create or do they rely on the value of the product?

Good questions. First, we will ultimately have a monopoly in nothing. The rest of the planet is going to compete with us in all industries at all skill levels. So the only sustainable competitive edge is innovation: creating what’s next. If Apple stops with the iPod and iPhone they will not be the economic story of the next decade. But if they keep creating great new products the value they add will be in pre and post production, not in the making of their next great products. High wage manufacturing is not coming back at any scale. Making things, by and large, across the planet will increasingly be done by machines or low wage workers. Its not good news, but it is the new reality.

Thanks, Lou. I love that line, “We will have a monopoly in nothing.” So many individuals and communities in Michigan seem to forget that they can’t survive without a niche, a strategy, or a unique market position.

I’ve been asking folks in Wayne County a simple question lately – Why does your community exist? A local city council member told me that her community was a great bedroom community, before listing a lot of Not In My Backyard businesses that are located in the same town. Seems like a weak approach to being a good bedroom community.

It was nice to see that the state told River Rouge and Ecorse to work together or lose self rule. Most importantly, though, I think these communities need to come up with a joint strategy, which defines what they are and why they exist. River Rouge was a great bedroom community when Rouge Steel needed lots of workers, but why does it exist today? Same for Ecorse. Why would anyone want to live or work or recreate in River Rouge-Ecorse? That’s not a backhanded question, its a legitimate one that these communities and others like them should be asking.

Dan Gilmartin – who runs the Michigan Municipal League – describes what they are all about as creating communities for the next fifty years, rather than the last fifty. That is exactly what we need. Just as its true for our economy, its true for our communities: what made us prosperous in the past, won’t in the future. You are exactly right our communities are going to have to transform themselves to align with new realities or continue to decline.